Education Centre

All of us yearn for financial freedom - the power to leave our day jobs and enjoy a long, leisurely retirement.

In reality, we all know that working hard, plying extra cash into our super fund and banking on a nice hefty payout at the end of our career isn't necessarily going to provide enough wealth for us to retire on. Sure, it might give us some spending money in the short term, but many of us will live well beyond our 60s and 70s. So what do we do when our super dries up?

There's the pension, but after living on $50,000 to $60,000 a year, will you be happy settling for an $18,000 or so handout from the government?

The good news is that with a bit of foresight, some smart strategies and the old reliable bricks and mortar, we all have the capacity to make our golden years even more comfortable - and a lot more prosperous!

Why property?

"Property is a basic commodity," asserts Monique Wakelin of Wakelin Property Advisory.

"We have 70% home ownership in this country, so it stands to reason that around 30% of the population rents at any given time. This means you have a consistently significant large pool of people requiring rental accommodation."

Property has certain advantages over other asset classes, such as shares. It's less volatile than the stock market and historically, real estate has always increased in value. It has its ups and downs but it's relatively dependable if investors are wise enough to understand that this commodity requires a long-term commitment to pay decent dividends.

Wakelin advises, "Property is illiquid and carries a high cost for entry and exit. This is why it has to be a long-term strategy and why the bias has to be toward capital growth." But she assures us that "because it's a basic commodity, it has a level of inbuilt stability in terms of demand and that underpins its capital value."

Bill Zheng of Investors Direct Financial Group likes property because it allows investors to leverage other people's money fairly safely, "which means higher returns at lower risk compared to other asset classes."

He adds, "The average person retires with $140K superannuation in Australia. You don't see too many people with more than $300K super, but you can find plenty of people with more than $300K equity in their home or investment properties."

Because well-bought property will continue to generate capital growth throughout the years, financial planner and property writer Margaret Lomas cites it as a favoured asset class and says if you're careful about where and what you buy, you'll always end up with more than what you begin with.

"Providing it's bought well, a property can become an asset that continues to grow for you into retirement," says Lomas. "If you have a portfolio which by the time you retire gives you $20,000 a year income, that's the lowest it's going to give you because traditionally property will grow over time, as does its rent return."